SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                    FORM 10-Q

(Mark  One)

 X     Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
---    of 1934
       For  the  quarterly  period  ended  September  30,  2006.
                                           --------------------

                                       or

       Transition Report under Section 13 or 15(d) of the Securities Exchange
---    Act  of  1934
       For  the  transition  period  from                to                .
                                          --------------    ---------------

                          Commission File No.  0-23980
                                               -------

                     Southeastern Bank Financial Corporation
                     ---------------------------------------
             (Exact name of registrant as specified in its charter)

              Georgia                              58-2005097
              -------                              ----------
    (State  of  Incorporation)       (I.R.S.  Employer  Identification  No.)

                    3530 Wheeler Road, Augusta, Georgia 30909
                    -----------------------------------------
                    (Address of principal executive offices)

                                 (706) 738-6990
                                 --------------
                (Issuer's telephone number, including area code)

                                 Not Applicable
                                 --------------
    (Former name, former address and former fiscal year, if changed since last
                                     report)

     Check  whether  the  issuer:  (1) filed all reports required to be filed by
Section  13  or 15(d) of the Exchange Act during the past 12 months (or for such
shorter  period  that the registrant was required to file such reports), and (2)
has  been  subject  to  such  filing  requirements for the past 90 days. Yes  X
                                                                             ---
No
   ---

     Check  whether  the  issuer  is  a  large accelerated filer, an accelerated
filer,  or  a  non-accelerated  filer.  See definition of "accelerated filer and
large  accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  [ ]  Accelerated  filer [X]  Non-accelerated  filer [ ]

     Indicate  by  check  mark  whether  the  registrant  is a shell company (as
defined  in  Rule  12b-2  of  the  Exchange  Act):  Yes    No  X
                                                       ---    ---

                      APPLICABLE ONLY TO CORPORATE ISSUERS

     State  the  number of shares outstanding of each of the issuer's classes of
common  equity,  as  of  the  latest  practicable  date:

     5,432,854 shares of common stock, $3.00 par value per share, outstanding as
of  October  31,  2006.


<PAGE>
<TABLE>
<CAPTION>
                        SOUTHEASTERN BANK FINANCIAL CORPORATION
                                       FORM 10-Q
                                         INDEX

                                                                                Page
<S>     <C>       <C>                                                           <C>
Part I
        Item 1.   Financial Statements (Unaudited)

                  Consolidated Balance Sheets as of September 30, 2006 and
                    December 31, 2005                                              3

                  Consolidated Statements of Income for the Three and Nine
                    Months ended September 30, 2006 and 2005                       4

                  Consolidated Statements of Cash Flows for the
                    Nine Months ended September 30, 2006 and 2005                  5

                  Notes to Consolidated Financial Statements                       6

        Item 2.   Management's Discussion and Analysis of
                    Financial Condition and Results of Operations                 14

        Item 3.   Quantitative and Qualitative Disclosures about Market Risk      29

        Item 4.   Controls and Procedures                                         29

Part II  Other  Information

        Item 1.   Legal Proceedings                                                *
        Item 1A.  Risk Factors                                                    30
        Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds     30
        Item 3.   Defaults Upon Senior Securities                                  *
        Item 4.   Submission of Matters to a Vote of Security Holders              *
        Item 5.   Other Information                                                *
        Item 6.   Exhibits                                                        31

Signature                                                                         32
</TABLE>

* No information submitted under this caption


                                        1
<PAGE>
                                     PART I
                              FINANCIAL INFORMATION


                                        2
<PAGE>
<TABLE>
<CAPTION>
                 SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
                                Consolidated Balance Sheets
                                        (Unaudited)

                         ASSETS
                                                            September 30,    December 31,
                                                                2006             2005
                                                           ---------------  --------------
<S>                                                        <C>              <C>
Cash and due from banks                                    $   29,874,861   $  18,792,799
Federal funds sold                                             27,999,000       2,758,000
Interest-bearing deposits in other banks                          512,541       1,012,257
                                                           ---------------  --------------
      Cash and cash equivalents                                58,386,402      22,563,056

Investment securities
  Available-for-sale                                          218,491,019     197,551,996
  Held-to-maturity, at cost (fair values of
    $3,369,014 and $3,897,341, respectively)                    3,275,750       3,776,040

Loans held for sale                                            15,289,290      22,146,834

Loans                                                         677,576,995     579,087,791
  Less allowance for loan losses                               (9,737,666)     (9,124,801)
                                                           ---------------  --------------
      Loans, net                                              667,839,329     569,962,990

Premises and equipment, net                                    23,274,120      21,376,183
Accrued interest receivable                                     5,387,374       4,624,023
Bank-owned life insurance                                      15,822,530      11,863,276
Restricted equity securities                                    4,936,281       4,287,481
Other assets                                                    7,083,937       6,125,360
                                                           ---------------  --------------

                                                           $1,019,786,032   $ 864,277,239
                                                           ===============  ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
  Noninterest-bearing                                      $  100,582,521   $  97,083,931
  Interest-bearing:
    NOW accounts                                              151,172,700     100,692,388
    Savings                                                   256,281,081     265,131,754
    Money management accounts                                  53,968,604      37,719,408
    Time deposits over $100,000                               165,866,087     122,009,813
    Other time deposits                                        64,727,263      41,017,555
                                                           ---------------  --------------
                                                              792,598,256     663,654,849

Federal funds purchased and securities sold
  under repurchase agreements                                  62,902,781      67,013,416
Advances from Federal Home Loan Bank                           60,000,000      52,000,000
Other borrowed funds                                            1,000,000       1,000,000
Accrued interest payable and other liabilities                  7,861,443       7,025,767
Subordinated debentures                                        20,000,000      10,000,000
                                                           ---------------  --------------
      Total liabilities                                       944,362,480     800,694,032
                                                           ---------------  --------------

Stockholders' equity:
  Common stock, $3.00 par value; 10,000,000 shares
    authorized; 5,416,118 and 5,279,241 shares issued in
    2006 and 2005, respectively; 5,416,118 and 5,263,144
    shares outstanding in 2006 and 2005, respectively          16,248,354      15,837,723
  Additional paid-in capital                                   38,386,164      34,138,876
  Retained earnings                                            22,350,522      16,099,414
  Treasury stock, at cost; 0 and 16,097 shares in
    2006 and 2005, respectively                                         -        (233,898)
  Accumulated other comprehensive loss, net                    (1,561,488)     (2,258,908)
                                                           ---------------  --------------
  Total stockholders' equity                                   75,423,552      63,583,207
                                                           ---------------  --------------

                                                           $1,019,786,032   $ 864,277,239
                                                           ===============  ==============
</TABLE>

See accompanying notes to consolidated financial statements.


                                        3
<PAGE>
<TABLE>
<CAPTION>
                      SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
                                  Consolidated Statements of Income
                                             (Unaudited)

                                                    Three Months Ended         Nine Months Ended
                                                       September 30,             September 30,
                                               --------------------------  -------------------------
                                                   2006          2005         2006          2005
                                               ------------  ------------  -----------  ------------
<S>                                            <C>           <C>           <C>          <C>
Interest income:
  Loans, including fees                        $14,208,614   $10,345,667   $39,038,976  $27,860,831
  Investment securities                          2,705,083     2,001,470     7,863,464    5,702,611
  Federal funds sold                               195,013       131,878       389,642      283,247
  Interest-bearing deposits in other banks           5,808         7,400        19,458       16,599
                                               ------------  ------------  -----------  ------------
      Total interest income                     17,114,518    12,486,415    47,311,540   33,863,288
                                               ------------  ------------  -----------  ------------

Interest expense:
  Deposits                                       6,479,749     3,746,904    16,945,683    9,637,475
  Federal funds purchased and securities sold
    under repurchase agreements                    754,106       459,035     2,162,860    1,081,435
  Other borrowings                               1,168,587       609,027     3,073,878    1,671,117
                                               ------------  ------------  -----------  ------------
      Total interest expense                     8,402,442     4,814,966    22,182,421   12,390,027
                                               ------------  ------------  -----------  ------------

      Net interest income                        8,712,076     7,671,449    25,129,119   21,473,261

Provision for loan losses                          666,913       589,260     1,627,041    1,576,223
                                               ------------  ------------  -----------  ------------

      Net interest income after provision
        for loan losses                          8,045,163     7,082,189    23,502,078   19,897,038
                                               ------------  ------------  -----------  ------------

Noninterest income:
  Service charges and fees on deposits           1,422,806     1,391,363     4,314,928    3,956,858
  Gain on sales of loans                         1,328,907     1,520,241     3,854,244    3,860,823
  Investment securities (losses) gains, net        (10,000)      (46,406)      273,600      (85,666)
  Retail investment income                         192,363        87,030       576,336      290,596
  Trust service fees                               214,294       163,855       605,126      470,791
  Increase in cash surrender value of
    bank-owned life insurance                      156,010       108,393       445,253      293,339
  Miscellaneous income                             150,682        57,727       447,077      385,030
                                               ------------  ------------  -----------  ------------
      Total noninterest income                   3,455,062     3,282,203    10,516,564    9,171,771
                                               ------------  ------------  -----------  ------------

Noninterest expense:
  Salaries and other personnel expense           4,538,449     4,005,089    13,483,469   11,354,013
  Occupancy expenses                               637,723       687,031     2,071,624    2,042,557
  Other operating expenses                       2,054,492     1,753,359     6,073,147    4,992,931
                                               ------------  ------------  -----------  ------------
      Total noninterest expense                  7,230,664     6,445,479    21,628,240   18,389,501
                                               ------------  ------------  -----------  ------------

      Income before income taxes                 4,269,561     3,918,913    12,390,402   10,679,308

Income tax expense                               1,344,532     1,320,336     4,078,994    3,590,990
                                               ------------  ------------  -----------  ------------

      Net income                               $ 2,925,029   $ 2,598,577   $ 8,311,408  $ 7,088,318
                                               ============  ============  ===========  ============

Basic net income per share                     $      0.55   $      0.49   $      1.57  $      1.35
                                               ============  ============  ===========  ============

Diluted net income per share                   $      0.55   $      0.48   $      1.56  $      1.33
                                               ============  ============  ===========  ============

Weighted average common shares outstanding       5,312,831     5,258,713     5,288,760    5,256,367
                                               ============  ============  ===========  ============

Weighted average number of common and
  common equivalent shares outstanding           5,361,440     5,358,959     5,329,051    5,344,621
                                               ============  ============  ===========  ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                        4
<PAGE>
<TABLE>
<CAPTION>
                    SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
                             Consolidated Statements of Cash Flows
                                          (Unaudited)

                                                                 Nine Months Ended September 30,
                                                                      2006              2005
                                                                -----------------  --------------
<S>                                                             <C>                <C>
Cash flows from operating activities:
Net income                                                      $      8,311,408   $   7,088,318
  Adjustments to reconcile net income to net cash
    provided by operating activities
    Depreciation                                                       1,013,581       1,088,406
    Provision for loan losses                                          1,627,041       1,576,223
    Net investment securities (gains) losses                            (273,600)         85,666
    Net (accretion of discount) amortization of premium
      on investment securities                                          (266,989)        273,044
    Increase in CSV of bank owned life insurance                        (445,253)       (293,339)
    Stock options compensation cost                                      331,698               -
    (Gain) loss on disposal of premises and equipment                    (95,050)          6,685
    Gain on the sale of other real estate                                      -          (9,405)
    Gain on sales of loans                                            (3,854,244)     (3,860,823)
    Real estate loans originated for sale                           (200,576,379)   (199,233,926)
    Proceeds from sales of real estate loans                         211,288,167     206,363,501
    Increase in accrued interest receivable                             (763,351)       (426,787)
    (Increase) decrease in other assets                               (1,331,854)         38,039
    Increase in accrued interest payable and other liabilities           835,676         290,074
                                                                -----------------  --------------
      Net cash provided by operating activities                       15,800,851      12,985,676
                                                                -----------------  --------------

Cash flows from investing activities:
  Proceeds from sales of available for sale securities                15,729,239      23,852,712
  Proceeds from maturities of available for sale securities           54,444,673      17,796,690
  Proceeds from maturities of held to maturity securities                500,000               -
  Purchase of available for sale securities                          (89,515,360)    (75,180,015)
  Purchase of Federal Home Loan Bank stock                              (873,800)       (920,600)
  Proceeds from redemption of FHLB stock                                 225,000         225,000
  Net increase in loans                                              (99,503,380)    (71,523,269)
  Purchase of Bank-owned life insurance                               (3,500,000)              -
  Additions to premises and equipment                                 (4,607,619)     (2,572,201)
  Proceeds from sale of other real estate                                      -         172,286
  Proceeds from sale of premises and equipment                         1,791,151           2,500
                                                                -----------------  --------------
    Net cash used in investing activities                           (125,310,096)   (108,146,897)
                                                                -----------------  --------------

Cash flows from financing activities:
  Net increase in deposits                                           128,943,407      89,088,632
  Net (decrease) increase in federal funds purchased and
    securities sold under repurchase agreements                       (4,110,635)     13,585,690
  Advances from Federal Home Loan Bank                                19,000,000      17,000,000
  Payments of Federal Home Loan Bank advances                        (11,000,000)     (5,000,000)
  Proceeds from subordinated debentures                               10,000,000               -
  Proceeds from issuance of common stock                               4,429,166               -
  Proceeds from other borrowed funds                                           -         100,000
  Purchase of treasury stock                                             (45,174)              -
  Payment of cash dividends                                           (2,060,300)     (2,049,219)
  Proceeds from stock options exercised                                  176,127           3,010
                                                                -----------------  --------------
    Net cash provided by financing activities                        145,332,591     112,728,113
                                                                -----------------  --------------

    Net increase in cash and cash equivalents                   $     35,823,346   $  17,566,892

Cash and cash equivalents at beginning of period                      22,563,056      26,024,197

                                                                -----------------  --------------
Cash and cash equivalents at end of period                      $     58,386,402   $  43,591,089
                                                                =================  ==============

Supplemental disclosures of cash paid during the period for:
  Interest                                                      $     21,506,010   $  12,536,090
                                                                =================  ==============

  Income taxes                                                  $      4,912,075   $   3,560,000
                                                                =================  ==============

Supplemental information on noncash investing activities:
  Loans transferred to other real estate                        $              -   $     109,452
                                                                =================  ==============
</TABLE>

See accompanying notes to consolidated financial statements.


                                        5
<PAGE>
             SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARY

                   Notes to Consolidated Financial Statements

                               September 30, 2006

Note  1  -  Basis  of  Presentation

The  accompanying  consolidated  financial  statements  include  the accounts of
Southeastern  Bank  Financial  Corporation (the "Company"), and its wholly-owned
subsidiaries,  Georgia  Bank  &  Trust  Company  and  Southern  Bank  &  Trust.
Significant  intercompany  transactions  and  accounts  are  eliminated  in
consolidation.

The  financial statements for the three and nine months ended September 30, 2006
and  2005  are  unaudited  and  have  been  prepared  pursuant  to the rules and
regulations  of the Securities and Exchange Commission.  Certain information and
footnote  disclosures  normally  included  in  financial  statements prepared in
accordance with accounting principles generally accepted in the United States of
America  have  been condensed or omitted pursuant to such rules and regulations.
These  consolidated  financial statements should be read in conjunction with the
audited  consolidated  financial  statements  and  footnotes  included  in  the
Company's  annual  report  on  Form  10-K  for the year ended December 31, 2005.

In  the  opinion  of management, all adjustments necessary to present fairly the
financial  position and the results of operations and cash flows for the interim
periods  have been made.  All such adjustments are of a normal recurring nature.
The results of operations for the three and nine months ended September 30, 2006
are  not  necessarily  indicative of the results of operations which the Company
may  achieve  for  the  entire  year.

Some items in the prior period financial statements were reclassified to conform
to  the  current  presentation.

Note  2  -  Comprehensive  Income

Other comprehensive income for the Company consists of changes in net unrealized
gains  and  losses  on  investment  securities  available  for  sale.  Total
comprehensive  income  for  the  three  months  ended  September  30,  2006  was
$5,358,000 compared to $2,615,000 for the three months ended September 30, 2005.
Total  comprehensive  income  for  the  nine months ended September 30, 2006 was
$9,009,000  compared to $6,303,000 for the nine months ended September 30, 2005.

Note  3  -  Stock-based  Compensation

During  2000,  the  Company  adopted the 2000 Long-Term Incentive Plan (the 2000
Plan)  which  allows  for  stock  option  awards for up to 253,000 shares of the
Company's  common  stock  to  employees, officers, and directors of the Company.
The  Company


                                        6
<PAGE>
believes that such awards better align the interests of its employees with those
of its shareholders.  Under the provisions of the 2000 Plan, the option price is
determined by a committee of the board of directors at the time of grant and may
not  be  less than 100% of the fair value of the common stock on the date of the
grant  of  such  option.  Generally,  when  granted,  these  options vest over a
five-year period.  However, there were 10,000 options granted in 2005, that vest
based  on  specific  loan  growth  performance  targets.  All  options  must  be
exercised within a ten-year period.  As of September 30, 2006, all options under
this  plan  had  been  issued.

During  2006,  the  Company  adopted the 2006 Long-Term Incentive Plan (the 2006
Plan),  approved  by  shareholders at the annual meeting, which allows for stock
options  awards  for  up  to 250,000 shares of the Company's common stock to key
employees,  officers,  directors  and independent contractors providing material
services  to  the  Company.  The  purpose  of the Plan is to enhance stockholder
investment  by  attracting,  retaining  and  motivating key employees, officers,
directors  and  independent  contractors  of the Company, and to encourage stock
ownership  by  such  persons  by  providing  them  with  a  means  to  acquire a
proprietary  interest  in  the  Company's success, and to align the interests of
management  with  those of stockholders.  Under the provisions of the 2006 Plan,
the  option  price is determined by a committee of the board of directors at the
time  of  grant  and  may  not be less than 100% of the fair value of the common
stock  on  the date of the grant of such option.  Notwithstanding the foregoing,
in  the  case of an Incentive Stock Option granted to a Participant who is a Ten
Percent Stockholder, the Option Price shall not be less than one hundred and ten
percent  (110%)  of  the  Fair  Market  Value of the Common Stock on the Date of
Grant.  Generally,  when  granted,  these  options vest over a five-year period.
All  options  must  be  exercised  within a ten year period from the date of the
grant;  however,  options  issued to a ten percent stockholder must be exercised
within  a  five  year  period from its date of grant.  As of September 30, 2006,
29,834  options  had  been  granted  under  this  Plan.

The  Company  periodically purchases treasury stock and uses it for stock option
exercises, when available.  If treasury stock is not available, additional stock
is  issued.  The  Company  estimates  it  will  repurchase 25,000 shares or less
during  the  2006  year.

The  Company  will  accept  as  payment for options exercised, at the optionee's
discretion,  cash  or  shares  of  the  Company's  stock  at  market value, or a
combination of cash and Company stock.  For the three months ended September 30,
2006,  the  Company  received  no  cash  and  stock  with a fair market value of
$48,000.  For  the  three months ended September 30, 2005, $3,000 cash and stock
with  a  fair  market  value of $48,000 was received.  For the nine months ended
September  30, 2006, the Company received $176,000 in cash and stock with a fair
market  value  of  $69,000.  For  the  nine months ended September 30, 2005, the
Company  received  $3,000  cash  and stock with a fair market value of $258,000.
All  options issued are incentive stock options and therefore, no tax benefit is
realized.

Effective  January  1,  2006,  the  Company adopted SFAS No. 123 (Revised 2004),
Accounting  for  Stock-Based Compensation, which requires the Company to compute
the  fair  value  of options at the date of grant and to recognize such costs as
compensation


                                        7
<PAGE>
expense  ratably over the vesting period of the options.  For the three and nine
months  ended  September  30, 2006, the Company recognized $73,000 and $332,000,
respectively,  as  compensation  expense resulting from all stock options.  This
expense includes $138,000 related to the accelerated stock option vesting period
for  two  key  employees.

The  fair  value  of  each  option  is  estimated on the date of grant using the
Black-Scholes  valuation  model that uses the assumptions noted in the following
table.  Expected  volatility  is  the  measure  of the amount by which the share
price  is  expected to fluctuate during a period.   The method used to calculate
historical  average  annualized  volatility is based on the closing price of the
first  trade  of  each  month.  Expected  dividends  are  based on the Company's
historical  pattern  of  dividend payments.  The Company uses historical data to
estimate  option  exercise  and employee termination within the valuation model.
The  risk-free  rate  is  the  ten year U.S. Treasury note at the time of grant.

Stock  Options  with  a  Specified  Vesting  Period
---------------------------------------------------

The following tables provide information for stock options that vest over a five
year  period.

<TABLE>
<CAPTION>
                                 Three Months Ended               Nine Months Ended
                                     September                        September
                         --------------------------------  --------------------------------
                              2006             2005             2006             2005
                         ---------------  ---------------  ---------------  ---------------
<S>                      <C>              <C>              <C>              <C>
Expected volatility      38.08% - 38.73%           30.40%  33.47% - 38.73%  29.87% - 32.98%

Expected dividend yield            2.00%            2.00%            2.00%            2.00%

Expected option life               7.92             8.54             7.92             8.54

Risk-free interest rate    4.78% - 5.10%            4.06%    4.36% - 5.14%    4.05% - 4.61%
</TABLE>

A  summary of activity for stock options that vest over a five year period as of
September 30, 2006 and September 30, 2005, and changes during the nine months is
presented  in  the  following  table:


                                        8
<PAGE>
<TABLE>
<CAPTION>
                                                     For the Nine Months Ended September 30, 2006 and 2005
                                          --------------------------------------------------------------------------
                                                                                     Weighted
                                                                 Weighted            average
                                                                 average            remaining          Aggregate
                                                                 exercise        contractual life      Intrinsic
                                               Shares           price/share          in years            Value
                                          -----------------  ------------------  ----------------  -----------------
<S>                                       <C>                <C>                 <C>               <C>
Options outstanding - December 31, 2005            205,434   $           21.35

Granted in 2006                                     45,000               39.81

Options exercised in 2006                          (22,649)             (10.84)
                                          -----------------  ------------------

Options outstanding - September 30, 2006           227,785   $           26.06               7.23  $       2,947,538
                                          =================  ==================  ================  =================

Exercisable at September 30, 2006                   98,245   $           18.30               5.93  $       2,033,672
                                          =================  ==================  ================  =================


Options outstanding - December 31, 2004            188,040   $           17.05

Granted in 2005                                     24,000               32.69

Options exercised in 2005                          (18,400)             (14.19)
                                          -----------------  ------------------

Options outstanding - September 30, 2005           193,640   $           19.26               7.05  $       4,597,014
                                          =================  ==================  ================  =================

Exercisable at September 30, 2005                   85,997   $           14.85               6.17  $       2,420,816
                                          =================  ==================  ================  =================
</TABLE>

The  weighted  average  grant-date  fair value of the options granted during the
three  months  ended  September  30, 2006 and September 30, 2005 were $16.59 and
$11.59, respectively.  The weighted average grant-date fair value of the options
granted  during  the nine months ended September 30, 2006 and September 30, 2005
was  $16.21  and  $10.99,  respectively.  The  total  intrinsic value of options
exercised  during  the  three  months ended September 30, 2006 and September 30,
2005  was $156,000 and $162,000.  The total intrinsic value of options exercised
during  the  nine  months  ended  September  30, 2006 and September 30, 2005 was
$653,000  and  $414,000,  respectively.

A  summary  of the status of the Company's nonvested options as of September 30,
2006  and  September  30,  2005  is  presented  in  the  following  table.


                                        9
<PAGE>
<TABLE>
<CAPTION>
                                                          Weighted
                                                          Average
                                                         Grant Date
                                              Shares     Fair Value
                                            -----------  -----------
<S>                                         <C>          <C>
           Nonvested at December 31, 2005      115,837   $     17.73

           Granted in 2006                      45,000         16.21

           Vested in 2006                      (29,297)        15.53
                                            -----------  -----------

           Nonvested at September 30, 2006     131,540   $     17.70
                                            ===========  ===========


           Nonvested at December 31, 2004      115,851   $     19.57

           Granted in 2005                      24,000         10.99

           Vested in 2005                      (32,208)        15.61
                                            -----------  -----------

           Nonvested at September 30, 2005     107,643   $     18.85
                                            ===========  ===========
</TABLE>

As  of September 30, 2006, there was $841,000 of total unrecognized compensation
cost  related to nonvested options that vest over a five year period.  That cost
is  expected  to be recognized over a weighted average period of 3.2 years.  The
total  fair value of shares vested during the nine month periods ended September
30,  2006  and  2005  was  $1.1  million  for  each  period.

Performance  Stock  Options
---------------------------

The  following  tables  provide information for stock options that vest based on
specific  loan  growth  performance  targets.


                                       10
<PAGE>
<TABLE>
<CAPTION>
                                                    For the Nine Months Ended September 30, 2005 and 2006
                                          ------------------------------------------------------------------------
                                                                                  Weighted
                                                                                   average
                                                                                  remaining          Aggregate
                                                                 Exercise      contractual life      Intrinsic
                                               Shares          price/share         in years            Value
                                          ----------------  -----------------  ----------------  -----------------
<S>                                       <C>               <C>                <C>               <C>
Options outstanding- December 31, 2005              10,000  $           34.30

Granted in 2006                                          -                  -

Options exercised in 2006                                -                  -
                                          ----------------  -----------------

Options outstanding - September 30, 2006            10,000  $           34.30               8.8  $          47,000
                                          ================  =================  ================  =================

Exercisable at September 30, 2006                    2,000  $           34.30               8.8  $           9,400
                                          ================  =================  ================  =================


Options outstanding- December 31, 2004                   -  $               -

Granted in 2005                                     10,000              34.30

Options exercised in 2005                                -                  -
                                          ----------------  -----------------

Options outstanding - September 30, 2005            10,000  $           34.30               9.8  $          87,000
                                          ================  =================  ================  =================

Exercisable at September 30, 2005                        -  $               -                 -  $               -
                                          ----------------  -----------------  ----------------  -----------------
</TABLE>


<TABLE>
<CAPTION>
                                               Weighted
                                                Average
                                              Grant Date
                                   Shares     Fair Value
                                 -----------  -----------
<S>                              <C>          <C>
Nonvested at December 31, 2005       10,000   $     11.59

Granted in 2006                           -             -

Vested in 2006                       (2,000)        11.59
                                 -----------  -----------

Nonvested at September 30, 2005       8,000   $     11.59
                                 ===========  ===========


Nonvested at December 31, 2004            -             -

Granted in 2005                      10,000         11.59

Vested in 2005                            -             -
                                 -----------  -----------

Nonvested at September 30, 2005      10,000   $     11.59
                                 -----------  -----------
</TABLE>

As  of  September 30, 2006, there was $57,000 of total unrecognized compensation
cost  related  to  nonvested options granted based on performance.  That cost is
expected  to  be  recognized  over  a  weighted  average  period  of  3.8 years.


                                       11
<PAGE>
Pro  Forma  Earnings  Per  Share
--------------------------------

Had  compensation  cost been determined based upon the fair value of the options
at  the  grant dates consistent with the method recommended by SFAS No. 123, the
Company's  net  income and income per share, on a pro forma basis, for the three
and  nine  months  ended  September  30,  2005  would  have  been  as  follows:

<TABLE>
<CAPTION>
                                        Three Months          Nine Months
                                            Ended                Ended
                                     September 30, 2005   September 30, 2005
                                     -------------------  -------------------
<S>                                  <C>                  <C>
Net income                           $         2,598,597  $         7,088,318
Deduct: Total stock-based
    Compensation expense determined
    Under fair value based method,
    net of related tax effect                     64,352              172,874
                                     -------------------  -------------------
Pro Forma, net income                $         2,534,245  $         6,915,444
                                     ===================  ===================

Basic net income per share:
    As reported                      $              0.49  $              1.35
    Pro forma                        $              0.48  $              1.32

Diluted net income per share:
    As reported                      $              0.48  $              1.33
    Pro forma                        $              0.48  $              1.30
</TABLE>

Note  4  -  Cash  Dividend  Declared

On  July  19,  2006, the Company declared a quarterly cash dividend of $0.13 per
share  on  outstanding  shares.  The  dividend  was  paid  on August 15, 2006 to
shareholders  of  record  as  of  August  4,  2006.

On October 18, 2006, the Company declared a quarterly cash dividend of $0.13 per
share  on  outstanding  shares.  The dividend is payable on November 17, 2006 to
shareholders  of  record  as  of  November  3,  2006.

Note  5  -  Recently  Issued  Accounting  Standards  on the Financial Statements

In  July  2006,  the  FASB  released  Interpretation  No.  48,  "Accounting  for
Uncertainty in Income Taxes."  This Interpretation revises the recognition tests
for  tax positions taken in tax returns such that a tax benefit is recorded only
when  it  is  more  likely  than  not that the tax position will be allowed upon
examination  by  taxing authorities.  The amount of such a tax benefit to record
is  the  largest  amount  that  is  more  likely  than  not to be allowed.   Any
reduction  in  deferred  tax assets or increase in tax liabilities upon adoption
will


                                       12
<PAGE>
correspondingly  reduce  retained  earnings.  The Company has not yet determined
the effect of adopting this Interpretation, which is effective for it on January
1,  2007.

In  September  2006,  the  SEC  staff issued SEC Staff Accounting Bulletin (SAB)
Topic  1N,  "Financial  Statements -  Considering  the  Effects  of  Prior  Year
Misstatements  When   Quantifying  Misstatements   in  Current   Year  Financial
Statements" SAB  108.  SAB 108  permits the Company to adjust for the cumulative
effect  of  immaterial  errors relating to prior years in the carrying amount of
assets  and  liabilities as of the beginning of the current fiscal year, with an
offsetting adjustment to the opening balance of retained earnings in the year of
adoption.  SAB 108 also requires the adjustment of any prior quarterly financial
statements  within the fiscal year of adoption for the effects of such errors on
the  quarters  when  the  information is next presented. Such adjustments do not
require previously filed reports with the SEC to be amended. The Company has not
yet  determined  the effect of adopting this standard, which is effective for it
as  of  December  31, 2006. Any cumulative adjustments for prior year immaterial
errors  will  be  effective  as  of  January  1,  2006.


                                       13
<PAGE>
Item  2.  Management's  Discussion  and  Analysis  of  Financial  Condition  and
          Results of Operations

Overview
--------

Southeastern  Bank  Financial  Corporation  (the  "Company")  operates  two
wholly-owned  subsidiaries  in  the  Augusta-Richmond County, GA-SC metropolitan
area.  Georgia  Bank  & Trust Company ("GB&T") was organized by a group of local
citizens  and  commenced  business on August 28, 1989, with one branch location.
Today,  it  is  Augusta's largest community banking company operating eight full
service  branches  in  Augusta,  Martinez, and Evans, Georgia, and one branch in
Athens,  Georgia.  Mortgage origination offices are located in Augusta, Savannah
and  Athens,  Georgia.  Southern  Bank  &  Trust ("SB&T"), a federally chartered
thrift,  opened  its main office in Aiken, South Carolina on September 12, 2006.
The Company's operations campus is located in Augusta, Georgia and services both
subsidiaries.

The  Augusta-Richmond County, GA-SC metropolitan area, which includes Aiken, SC,
has  a diversified economy based primarily on government, transportation, public
utilities,  health  care,  manufacturing, construction, and wholesale and retail
trade.  Augusta  is  one  of  the leading medical centers in the Southeast.  The
2005  population  of  the  Augusta-Richmond  County, GA-SC metropolitan area was
520,332,  the  second  largest  in Georgia and fourth largest in South Carolina.
The  Company  expanded into the Athens, Georgia market in December 2005.  Athens
has  a  diversified economy which includes government, retail services, tourism,
manufacturing,  other  services,  and  health  care,  with  the largest share of
government  jobs  in  the state.  The Athens-Clarke County, GA metropolitan area
ranks  sixth  in  Georgia  with  a  2005  population  of  175,085.

The  Company's  services  include  the origination of residential and commercial
real  estate  loans,  construction  and  development  loans,  and commercial and
consumer  loans.  The  Company  also  offers  a  variety  of  deposit  programs,
including  noninterest-bearing  demand,  interest  checking,  money  management,
savings,  and time deposits.  In the Augusta-Richmond County, GA-SC metropolitan
area,  GB&T  had  12.34%  of  all deposits and was the second largest depository
institution  at  June  30,  2006,  as  cited  from the Federal Deposit Insurance
Corporation's  website.  Securities  sold  under  repurchase agreements are also
offered.  Additional  services  include  wealth  management,  trust,  retail
investment, and mortgage.  As a matter of practice, most mortgage loans are sold
in  the  secondary  market;  however,  some  mortgage  loans  are  placed in the
portfolio based on asset/liability management strategies.  The Company continues
to  concentrate  on  increasing its market share through various new deposit and
loan products and other financial services, by adding locations, and by focusing
on the customer relationship management philosophy.  The Company is committed to
building  life-long  relationships  with its customers, employees, shareholders,
and  the  communities  it  serves.

The  Company's  primary source of income is from its lending activities followed
by  interest  income from its investment activities, service charges and fees on
deposits, and gain on sales of mortgage loans in the secondary market.  Interest
income  on  loans  and


                                       14
<PAGE>
investment securities increased during the first nine months of 2006 as compared
to  the  first  nine  months  of 2005 due to rising interest rates and increased
volumes.  Service  charges  and  fees  on  deposits increased for the first nine
months  of  2006  as compared to the same period in 2005 due to increases in NSF
income on retail checking accounts and debit/ATM card income, both the result of
new  account  growth.  Gain  on  sales  of  mortgage  loans  did  not  change
significantly  during  the first nine months of 2006 compared to the same period
in  2005.  Other  significant contributors to income are trust services fees and
retail  investment  income.

<TABLE>
<CAPTION>
                             Table 1 - Selected Financial Data

                                         September 30     December 31,    December 31,
                                            2006              2005            2001
                                      -----------------  --------------  --------------
<S>                                   <C>                <C>             <C>
                                                     (Dollars in thousands)
     Assets                           $   1,019,786      $     864,277   $     481,544
     Loans                                  692,866            601,235         339,670
     Deposits                               792,598            663,655         369,149

     Return on average total assets            1.20%(1)           1.27%           1.02%
     Return on average equity                 16.65%(1)          16.15%          12.19%
</TABLE>

     (1) Annualized return as of September 30, 2006

The Company continues to experience steady growth as evidenced in Table 1 above,
reaching  a  new milestone at September 30, 2006, with assets over $1.0 billion.
The  Company  has  also achieved significant increases in loans and deposits and
continues  to  provide strong returns on assets and equity as noted in the table
above.  Net  income  for  2001  was $4.6 million compared to net income of $10.0
million  for  2005.  Net income for the nine months ended September 30, 2006 was
$8.3  million.  The  Company  has  paid  cash  dividends of $0.13 per share each
quarter  since  2004.

The  Company  meets  its  liquidity  needs  by managing cash and due from banks,
federal  funds  purchased and sold, maturity of investment securities, principal
repayments  from  mortgage-backed  securities,  and  draws  on  lines of credit.
Additionally,  liquidity  can  be  managed  through structuring deposit and loan
maturities.  The  Company  funds  loan and investment growth with core deposits,
securities sold under repurchase agreements and Federal Home Loan Bank advances.
During  inflationary  periods,  interest  rates generally increase and operating
expenses  generally  rise.  When  interest  rates  rise, variable rate loans and
investments  produce  higher  earnings;  however,  deposit  and other borrowings
interest  expense  also rise.  The Company monitors its interest rate risk as it
applies  to  net  income  in  a  ramp up and down annually 200 basis points (2%)
scenario  and  as  it applies to economic value of equity in a shock up and down
200 (2%) basis points scenario.  The Company monitors operating expenses through
responsibility  center  budgeting.


                                       15
<PAGE>
Forward-Looking  Statements
---------------------------

Southeastern  Bank Financial Corporation may, from time to time, make written or
oral forward-looking statements, including statements contained in the Company's
filings  with  the Securities and Exchange Commission (the "Commission") and its
reports  to  shareholders.  Statements  made in such documents, other than those
concerning  historical  information,  should  be  considered forward-looking and
subject to various risks and uncertainties.  Such forward-looking statements are
made  based  upon  management's  belief  as  well  as  assumptions  made by, and
information  currently  available  to,  management  pursuant  to  "safe  harbor"
provisions  of  the  Private  Securities  Litigation  Reform  Act  of 1995.  The
Company's  actual  results may differ materially from the results anticipated in
forward-looking  statements due to a variety of factors, including unanticipated
changes  in  the  Company's  local economies, the national economy, governmental
monetary  and  fiscal  policies,  deposit  levels,  loan demand, loan collateral
values  and  securities  portfolio  values;  difficulties  in interest rate risk
management;  the effects of competition in the banking business; difficulties in
expanding  the  Company's  business  into  new  markets; changes in governmental
regulation  relating  to the banking industry, including regulations relating to
branching  and acquisitions; failure of assumptions underlying the establishment
of  reserves  for  loan  losses,  including  the  value of collateral underlying
delinquent loans; and other factors.  The Company cautions that such factors are
not  exclusive.  The  Company  does  not undertake to update any forward-looking
statement  that  may be made from time to time by, or on behalf of, the Company.

Critical  Accounting  Estimates
-------------------------------

The  accounting  and  financial  reporting  policies  of  the Company conform to
accounting  principles generally accepted in the United States of America and to
general  practices  within  the banking industry.  Of these policies, management
has  identified  the allowance for loan losses as a critical accounting estimate
that  requires  difficult,  subjective  judgment  and  is  important  to  the
presentation  of  the  financial  condition  and  results  of  operations of the
Company.

The allowance for loan losses is established through a provision for loan losses
charged  to  expense,  which affects the Company's earnings directly.  Loans are
charged  against the allowance for loan losses when management believes that the
collectibility of the principal is unlikely.  Subsequent recoveries are added to
the  allowance.  The  allowance  is  an  amount that management believes will be
adequate  to absorb losses on existing loans that become uncollectible, based on
evaluations  of  the  collectibility  of  loans.  The  evaluations  take  into
consideration  such  factors  as  changes  in  the nature and volume of the loan
portfolio,  historical loss rates, overall portfolio quality, review of specific
problem  loans,  and  current  economic  conditions and trends that may affect a
borrower's  ability  to  repay.

The  Company  segments  its  allowance  for loan losses into the following three
major categories: 1) identified losses for impaired loans; 2) general allocation
for  Classified/Watch  loans;  and  3)  general  allocation  for  loans  with
satisfactory  ratings.  Risk  ratings  are initially assigned in accordance with
the  Company's  loan  and  collection


                                       16
<PAGE>
policy.  An organizationally independent department reviews grade assignments on
an ongoing basis.  Management reviews current information and events regarding a
borrower's  financial  condition  and  strengths,  cash flows available for debt
repayment,  the  related collateral supporting the loan and the effects of known
and  expected  economic conditions.  When the evaluation reflects a greater than
normal  risk associated with the individual loan, management classifies the loan
accordingly.  If  the  loan is determined to be impaired, management allocates a
portion  of  the  allowance for loan losses for that loan based upon the present
value  of future cash flows discounted at the loan's effective interest rate, or
the  fair  value  of  the  collateral  if collection of the loan is deemed to be
dependent  upon  the  collateral.  Regulatory guidance is also considered.  Cash
receipts  for  accruing  loans  are  applied to principal and interest under the
contractual  terms of the loan agreement; however, cash receipts on impaired and
nonaccrual  loans  for  which  the accrual of interest has been discontinued are
generally  applied first to principal and then to interest income depending upon
the  overall  risk  of  principal  loss  to  the  Company.  Impaired  and
Classified/Watch  loans  are  aggressively  monitored.  The allocation for loans
rated  satisfactory is further subdivided into various types of loans as defined
by  call  report  codes.  The  Company's  management also gives consideration to
subjective  factors  such as, national and local economic conditions, bankruptcy
trends, unemployment trends, loan concentrations, and competitive factors in the
local  market.  These  factors represent uncertainties in the Company's business
environment  and  are  included  in  the  various  individual  components of the
allowance  for  loan  losses.

Performance Overview -- Net Income
----------------------------------

The  Company's  net income for the third quarter of 2006 was $2.9 million, which
was  an  increase of $326,000 (12.6%) compared to net income of $2.6 million for
the  third  quarter  of 2005.  Diluted net income per share for the three months
ended  September 30, 2006 was $0.55 compared to $0.48 for the three months ended
September  30,  2005.  Net  income  for  the  first nine months of 2006 was $8.3
million,  an  increase  of $1.2 million (17.3%) compared with net income of $7.1
million  for  the first nine months of 2005.  The increase in net income for the
three  and  nine  months ended September 30, 2006 as compared with the three and
nine months ended September 30, 2005, was primarily a result of increases in net
interest  income  and  noninterest  income,  somewhat  offset  by  increases  in
noninterest  expense.  Interest  income  on both loans and investment securities
increased  due to increased volumes and higher interest rates.  Interest expense
on  deposits,  securities  sold under repurchase agreements and other borrowings
increased  as  a  result  of  rising interest rates and higher volumes.  Factors
contributing  to  the  increase  in noninterest income for the nine months ended
September  30, 2006, were increases in both service charges and fees on deposits
and  net  investment securities gains.  NSF fees on retail checking accounts and
debit/ATM  card  income  increased due to new account growth, somewhat offset by
decreases  in  service charges on business checking accounts due to increases in
the  earnings  credit.  Net  investment  securities  gains  increased  due  to a
$526,000  gain  recognized on the sale of equity securities, partially offset by
losses on the sale of agency securities.  Increases in retail investment income,
trust  service  fees  and  increase  in  cash-surrender value of bank-owned life
insurance  also  contributed to the increase in non-interest income for the nine
months  ended  September  30,  2006.


                                       17
<PAGE>
Noninterest  expense  increased during the three and nine months ended September
30, 2006 compared to the same periods ended September 30, 2005, primarily due to
increases  in  salaries  and  employee  benefits  related  to company growth and
increases  in other operating expenses.  The increase in noninterest expense for
the  nine  months  ended  September  30,  2006 included $1.1 million in expenses
related  to  the  Company's  expansion into new markets.  Significant changes in
other  operating  expenses  during  the  nine-month  period include increases in
processing  expenses  for  retail  and  business  checking  products  and retail
investment  services  as  well  as  increases  in  contributions  for a $200,000
donation to Georgia Bank Foundation.  Gain on sale of fixed assets increased for
the  nine-month  period  for  the  sale  of  property  and  automobiles  while
professional  fees  increased  for Sarbanes-Oxley 404 compliance, legal fees and
other  advisory  services.

<TABLE>
<CAPTION>
                             Table 2 - Selected Balance Sheet Data

                                                                                  Variance
                                              September 30,   December 31,   ------------------
                                                   2006           2005         Amount      %
                                              --------------  -------------  ----------  ------
                                                             (Dollars in thousands)
<S>                                           <C>             <C>            <C>         <C>
Cash and due from banks                       $       29,875  $      18,793  $  11,082    59.0%
Federal funds sold                                    27,999          2,758     25,241   915.2%
Investment securities                                221,767        201,328     20,439    10.2%
Loans                                                692,866        601,235     91,631    15.2%
Bank-owned life insurance                             15,823         11,863      3,960    33.4%
Assets                                             1,019,786        864,277    155,509    18.0%
Deposits                                             792,598        663,655    128,943    19.4%
Securities sold under repurchase agreements           62,903         67,013     (4,110)  (6.1%)
Advances from Federal Home Loan Bank                  60,000         52,000      8,000    15.4%
Subordinated debentures                               20,000         10,000     10,000   100.0%
Liabilities                                          944,362        800,694    143,668    17.9%
Stockholders' equity                                  75,424         63,583     11,841    18.6%
</TABLE>

Table  2  highlights  significant  changes in the balance sheet at September 30,
2006  as  compared  to  December  31,  2005.  Assets  increased  $155.5 million,
primarily  the  result  of  higher  balances  for  loans, federal funds sold and
investment  securities  as well as increases in cash and due from banks and cash
surrender  value  of  bank-owned life insurance.  These increases were funded by
increases  in  total  deposits  of  $128.9  million  along  with  increases  in
subordinated  debentures and Federal Home Loan Bank advances, somewhat offset by
decreases  in  securities  sold  under  repurchase agreements.  Proceeds of $4.5
million from a private placement stock offering, net income of $8.3 million less
dividends  paid  of  $2.1  million  also  contributed  to  the  funding.

The  annualized  return on average assets for the Company was 1.20% for the nine
months  ended  September  30,  2006,  compared to 1.24% for the same period last
year.  While  total  assets  have  increased  $193.9 million since third quarter
2005,  net income has only increased $1.2 million resulting in a slight decrease
in  ROA.  The  annualized  return  on


                                       18
<PAGE>
average  stockholders' equity was 16.65% for the nine months ended September 30,
2006,  compared  to  15.60%  for  the  same  period  last year.  The increase is
primarily  attributable  to net income growth and decreases in accumulated other
comprehensive  income.

Net  Interest  Income
---------------------

The  primary source of earnings for the Company is net interest income, which is
the  difference  between  income  on  interest-earning assets, such as loans and
investment securities, and interest expense incurred on interest-bearing sources
of  funds,  such  as  deposits  and  borrowings.  The  following tables show the
average  balances  of  interest-earning assets and interest-bearing liabilities,
annualized  average  yields  earned and rates paid on those respective balances,
and  the  actual interest income and interest expense for the periods indicated.
Average  balances  are calculated based on daily balances, yields on non-taxable
investments  are not reported on a tax equivalent basis and average balances for
loans  include  nonaccrual  loans  even  though  interest  was  not  earned.

<TABLE>
<CAPTION>
                             Table 3 - Average Balances, Income and Expenses, Yields and Rates

                                                Three Months Ended Sept. 30, 2006       Three Months Ended Sept. 30, 2005
                                            ----------------------------------------  ------------------------------------
                                                           Annualized                               Annualized
                                                             Average                                  Average     Amount
                                               Average      Yield or    Amount Paid      Average     Yield or     Paid or
                                               Amount         Rate       or Earned       Amount        Rate       Earned
                                            ----------------------------------------  -------------------------------------
<S>                                         <C>           <C>           <C>           <C>          <C>          <C>
                                                                          (Dollars in thousands)
Interest-earning assets:
  Loans                                     $   674,006          8.28%  $    14,208   $   564,071        7.21%  $    10,346
  Investment securities                         213,263          5.07%        2,705       175,791        4.55%        2,001
  Federal funds sold                             15,525          4.99%          195        15,505        3.37%          132
  Interest-bearing deposits in other banks          513          4.48%            6         1,016        2.85%            7
  Dividend income                                   N/A           N/A            25           N/A         N/A             -
                                            ------------                ------------  -----------               -----------
    Total interest-earning assets           $   903,307          7.46%  $    17,139   $   756,383        6.51%  $    12,486
                                            ------------                ------------  -----------               -----------

Interest-bearing liabilities:
  Deposits                                  $   644,983          3.99%  $     6,480   $   536,791        2.77%  $     3,747
  Federal funds purchased / securities
    sold under repurchase agreements             58,013          5.16%          754        56,702        3.21%          459
  Other borrowings                               60,823          5.36%          822        51,630        4.68%          609
  Subordinated debentures                        20,000          7.36%          371             -         N/A             -
                                            ------------                ------------  -----------               -----------
    Total interest-bearing liabilities      $   783,819          4.27%  $     8,427   $   645,123        2.96%  $     4,815
                                            ------------                ------------  -----------               -----------

Net interest margin/income:                                      3.76%  $     8,712                      3.97%  $     7,671
                                                                        ============                            ===========
</TABLE>


                                       19
<PAGE>
<TABLE>
<CAPTION>
                             Table 4 - Average Balances, Income and Expenses, Yields and Rates

                                                Nine Months Ended Sept. 30, 2006        Nine Months Ended Sept. 30, 2005
                                            ----------------------------------------  ------------------------------------
                                                           Annualized                               Annualized
                                                             Average                                  Average     Amount
                                               Average      Yield or    Amount Paid      Average     Yield or     Paid or
                                               Amount         Rate       or Earned       Amount        Rate       Earned
                                            ----------------------------------------  -------------------------------------
<S>                                         <C>           <C>           <C>           <C>          <C>          <C>
                                                                           (Dollars in thousands)
Interest-earning assets:
  Loans                                     $   642,156          8.05%  $    39,039   $   536,016        6.89%  $    27,861
  Investment securities                         212,909          4.93%        7,863       169,717        4.48%        5,702
  Federal funds sold                             11,034          4.72%          390        12,860        2.95%          283
  Interest-bearing deposits in other banks          646          4.02%           19           841        2.62%           17
  Dividend income                                   N/A           N/A            25           N/A         N/A             -
                                            ------------                ------------  -----------               -----------
    Total interest-earning assets           $   866,745          7.24%  $    47,336   $   719,434        6.24%  $    33,863
                                            ------------                ------------  -----------               -----------

Interest-bearing liabilities:
  Deposits                                  $   615,138          3.68%  $    16,946   $   511,515        2.52%  $     9,638
  Federal funds purchased / securities
    sold under repurchase agreements             60,193          4.80%        2,163        52,547        2.75%        1,081
  Other borrowings                               56,283          5.25%        2,209        48,162        4.64%        1,671
  Subordinated debentures                        16,740          7.10%          889             -         N/A             -
                                            ------------                ------------  -----------               -----------
    Total interest-bearing liabilities      $   748,354          3.97%  $    22,207   $   612,224        2.71%  $    12,390
                                            ------------                ------------  -----------               -----------

Net interest margin/income:                                      3.81%  $    25,129                      3.93%  $    21,473
                                                                        ============                            ===========
</TABLE>

Net interest income increased $1.0 million (13.6%) during the three-month period
and $3.7 million (17.0%) during the nine-month period as the result of increases
in  interest  income that exceeded increases in interest expense.  Loan interest
income  increased  $3.9  million  and  $11.2 million in the three and nine month
periods, respectively, while deposit interest expense increased $2.7 million and
$7.3  million  in the three and nine month periods, respectively, all the result
of  rising  interest  rates  and  the continued growth of account balances.  The
annual  average  balance for loans was $642.2 million at September 30, 2006 with
an annualized average yield of 8.05% compared to $536.0 million at September 30,
2005  with  an annualized average yield of 6.89%.  Interest-bearing deposits had
an  annual  average balance of $615.1 million with an annualized average rate of
3.68%  at  September  30, 2006 compared to $511.5 million and 2.52% at September
30,  2005.  Subordinated  debentures  had  an  annual  average  balance of $16.7
million  at  September 30, 2006 with related interest expense of $889,000 for an
annualized  average  rate  of  7.10%.  There  were no subordinated debentures at
September  30,  2005.  Other contributing factors during both the three and nine
month  periods  included  increases in interest income on investment securities,
increases  in  interest  expense  on  other borrowings and increases in interest
expense  on  federal  funds  purchased  and  securities  sold  under  repurchase
agreements,  all  the  result  of  increased  volumes and higher interest rates.

The  Company's  net  interest  margin  for  both the three and nine months ended
September  30,  2006 was 3.76% and 3.81%, respectively, as compared to 3.97% and
3.93% for the three and nine months ended September 30, 2005, respectively.  The
rate  for  earning  assets increased 94 basis points and 98 basis points for the
three  and  nine-month  periods,


                                       20
<PAGE>
respectively,  with  higher  average  yields  on loans and investment securities
accounting  for most of the increase.  The cost to fund earning assets increased
115  basis  points  and  110  basis points for the three and nine-month periods,
respectively,  primarily  due  to  higher  rates on deposits and securities sold
under  repurchase  agreements  as  well  as  the addition of interest expense on
subordinated  debentures  issued  in  December  2005  and  March  2006.

Noninterest  Income
-------------------

<TABLE>
<CAPTION>
                                                  Table 5 - Noninterest Income

                               Three Months Ended                                 Nine Months Ended
                                  September 30,               Variance              September 30,               Variance
                            ------------------------  -----------------------  -----------------------  -----------------------
                               2006         2005        Amount          %         2006         2005       Amount         %
                            -----------  -----------  -----------  ----------  ----------  -----------  -----------  ----------
<S>                         <C>          <C>          <C>          <C>         <C>         <C>          <C>          <C>
                                                                    (Dollars in thousands)
Service charges and fees
  on deposits               $    1,423   $    1,391   $       32         2.3%  $    4,315  $    3,957   $      358         9.0%
Gain on sales of loans           1,329        1,520         (191)     (12.6%)       3,854       3,861           (7)      (0.2%)
Investment securities
  (losses) gains, net              (10)         (46)          36      (78.3%)         274         (86)         360     (418.6%)
Retail investment income           192           87          105       120.7%         577         291          286        98.3%
Trust services fees                214          164           50        30.5%         605         471          134        28.5%
Increase in cash surrender
  value of bank-owned
  life insurance                   156          108           48        44.4%         445         293          152        51.9%
Miscellaneous income               151           58           93       160.3%         447         385           62        16.1%
                            -----------  -----------  -----------  ----------  ----------  -----------  -----------  ----------
Total noninterest income    $    3,455   $    3,282   $      173         5.3%  $   10,517  $    9,172   $    1,345        14.7%
                            ===========  ===========  ===========  ==========  ==========  ===========  ===========  ==========
</TABLE>

Noninterest  income  increased $173,000 (5.3%) during the three-month period and
$1.3 million (14.7%) during the nine-month period.  The most significant changes
for  the  three-month  period were a decrease in gain on sales of loans due to a
lower  volume  of  mortgage  loans  closed during third quarter 2006 compared to
third quarter 2005 and an increase in retail investment income due to production
by  new personnel.  Increases in service charges and fees on deposits during the
nine-month  period  were  primarily  due  to  increases  in  NSF fees for retail
checking  accounts  and  debit/ATM  card  income, both the result of new account
growth,  somewhat  offset  by  decreases in service charges on business checking
accounts  due  to increases in the earnings credit.  Increases in net investment
securities  gains  for  the nine-month period were the result of a $526,000 gain
recognized  on  the sale of equity securities, partially offset by losses on the
sale  of  agency  securities.  Other  contributing  factors  to  the increase in
noninterest  income  for  the  nine-month  period  include  increases  in retail
investment  income due to production by new personnel, increases in the increase
in  cash-surrender  value  of  bank-owned  life  insurance  due to an additional
purchase  of  $3.5  million  in  bank-owned life insurance in February 2006, and
increases  in  trust  services  fees  due  to increased sales from the continued
development  of  that  area.


                                       21
<PAGE>
Noninterest  Expense
--------------------

<TABLE>
<CAPTION>
                                               Table 6 - Noninterest Expense

                             Three Months Ended                                Nine Months Ended
                                September 30,               Variance             September 30,             Variance
                           ----------------------  -----------------------  ----------------------  ----------------------
                              2006         2005       Amount        %          2006        2005       Amount       %
                           ----------  ----------  -----------  ----------  ----------  ----------  ----------  ----------
<S>                        <C>         <C>         <C>          <C>         <C>         <C>         <C>         <C>
                                                          (Dollars in thousands)
Salaries and other
  personnel expense        $    4,539  $    4,005  $      534        13.3%  $   13,483  $   11,354  $    2,129       18.8%
Occupancy expenses                638         687         (49)      (7.1%)       2,072       2,043          29        1.4%
Other operating expenses        2,054       1,753         301        17.2%       6,073       4,993       1,080       21.6%
                           ----------  ----------  -----------  ----------  ----------  ----------  ----------  ----------
Total noninterest expense  $    7,231  $    6,445  $      786        12.2%  $   21,628  $   18,390  $    3,238       17.6%
                           ==========  ==========  ===========  ==========  ==========  ==========  ==========  ==========
</TABLE>

Noninterest expense increased $786,000 (12.2%) during the three-month period and
$3.2  million  (17.6%)  during  the  nine-month  period.  Noninterest  expense
attributable  to  the  Company's expansion into new markets totaled $538,000 for
the  three  months ended September 30, 2006 and $1.1 million for the nine months
ended  September  30,  2006.  Salaries and other personnel expense increased for
third  quarter  2006 compared to third quarter 2005 due to offices opened in the
Aiken,  South  Carolina and Athens, Georgia markets, the expansion of the wealth
management area, medical expenses and stock options expense recognized to comply
with  SFAS  No.  123  (Revised 2004).  Increases in salaries and other personnel
expense  for  the  nine-month period are the result of company growth related to
new  markets,  opening  of  a  customer  care  center,  expansion  of the wealth
management  area,  FICA  taxes,  medical  expenses and stock option compensation
expense  recognized  for  the  acceleration  of  the  vesting period for two key
employees  and  to  comply  with  SFAS  No. 123 (Revised 2004).  Other operating
expenses  increased $301,000 (17.2%) for the three-month period and $1.1 million
(21.6%)  for the nine-month period.  Increases in processing expenses during the
three-month  period  were  primarily  due  to  retail investment processing fees
related  to  increased  production  while increases during the nine-month period
were  attributable  to  new account growth for both retail and business checking
products and retail investment processing fees.  Professional fees increased for
the  nine-month  period  for Sarbanes-Oxley 404 compliance, legal fees and other
advisory  services.  Contributions  increased  for  the nine-month period as the
result  of  a  $200,000  donation  made  to  Georgia  Bank  Foundation.

Income  Taxes
-------------

Income  tax  expense totaled $1.3 million in the third quarter of 2006 and 2005.
The  effective  tax  rate for the three months ended September 30, 2006 and 2005
was 31.5% and 33.7%, respectively.  Income tax expense for the nine months ended
September  30,  2006  totaled  $4.1  million  for an effective tax rate of 32.9%
compared  to  33.6% for the nine months ended September 30, 2005.  For the three
and  nine  months  ended  September  30,  2006 as compared to the three and nine
months  ended September 30, 2005, the nondeductible stock option expense and the
increase  in  disallowed  state  agency  and  non-


                                       22
<PAGE>
Georgia  municipal interest income was mostly offset by increases in federal and
Georgia  deductible  interest  income.  An  adjustment  for the 2005 Georgia tax
training  credit  resulted  in  a  decrease  in  the  effective  rates.

Asset  Quality
--------------

Table  5  which  follows  shows  the  current  and  prior  period  amounts  of
non-performing assets.  Non-performing assets were $2.8 million at September 30,
2006,  compared  to  $4.0  million  at  December  31,  2005  and $4.5 million at
September  30,  2005.  Significant  changes from December 2005 to September 2006
include  a  $658,000  decrease  in non-performing assets with balances less than
$100,000,  a $940,000 decrease for one customer from a combination of collateral
sale  and  charge-off,  a  $406,000  decrease  for  two  customers  removed from
nonaccrual status, and a $957,000 increase for two customers added to nonaccrual
status.  The ratio of non-performing assets to total loans and other real estate
was  0.40%  at  September  30,  2006, compared to 0.67% at December 31, 2005 and
0.80%  at  September  30,  2005.  The  control  and monitoring of non-performing
assets  continues  to  be  a  priority  of  management.

There  were  $56,000  and  $1,000  of  loans  past due 90 days or more and still
accruing  at September 30, 2006 and December 31, 2005, respectively.  There were
no  loans  past  due  90  days or more and still accruing at September 30, 2005.

<TABLE>
<CAPTION>
                             Table 7 - Non-Performing Assets
                                 (Dollars in thousands)

                                Sept. 30, 2006   December 31, 2005   Sept. 30, 2005
                                ---------------  ------------------  ---------------
<S>                             <C>              <C>                 <C>
Nonaccrual loans                $         2,769  $            4,009  $         4,513
Other real estate owned                       -                   -                -
                                ---------------  ------------------  ---------------
  Total non-performing assets   $         2,769  $            4,009  $         4,513
                                ===============  ==================  ===============


Loans past due 90 days or more
  and still accruing interest   $            56  $                1  $             -
                                ===============  ==================  ===============
</TABLE>


Allowance  for  Loan  Losses
----------------------------

The  allowance  for  loan  losses represents an allocation for probable incurred
loan  losses  in  the  loan  portfolio.  The  adequacy of the allowance for loan
losses  is  evaluated  periodically  based on a review of all significant loans,
with  particular  emphasis  on impaired, non-accruing, past due, and other loans
that  management  believes  require special attention.  The determination of the
allowance  for  loan  losses is considered a critical accounting estimate of the
Company.  See  "Critical  Accounting  Estimates."


                                       23
<PAGE>
When  reviewing  the allowance for loan losses, it is important to understand to
whom  the  Company lends.  The following table sets forth the composition of the
Company's  loan  portfolio  as  of  September  30,  2006  and December 31, 2005.

<TABLE>
<CAPTION>
                           Table 8 - Loan Portfolio Composition

                                      September 30, 2006  December 31, 2005
                                     -------------------  -----------------
                                      Amount       %      Amount       %
                                     ---------  -------  ---------  -------
<S>                                  <C>        <C>      <C>        <C>
                                             (Dollars in thousands)
     Commercial financial and
     agricultural. . . . . . . . .   $ 77,473    11.18%  $ 64,398    10.71%
                                     ---------  -------  ---------  -------
     Real estate
       Commercial . . . . . . . . .   192,968    27.85%   171,652    28.55%
       Residential. . . . . . . . .   134,923    19.47%   123,960    20.62%
       Residential held for sale. .    15,289     2.21%    22,147     3.68%
       Construction and
         development. . . . . . . .   241,257    34.82%   184,826    30.74%
                                     ---------  -------  ---------  -------
           Total real estate. . . .   584,437    84.35%   502,585    83.59%
                                     ---------  -------  ---------  -------
     Lease financing. . . . . . . .       122     0.02%       111     0.02%
     Consumer
       Direct . . . . . . . . . . .    24,066     3.47%    24,343     4.05%
       Indirect . . . . . . . . . .     6,911     1.00%     9,752     1.62%
       Revolving. . . . . . . . . .       731     0.11%       656     0.11%
                                     ---------  -------  ---------  -------
         Total consumer . . . . . .    31,708     4.58%    34,751     5.78%
                                     ---------  -------  ---------  -------
     Deferred loan origination fees      (874)   -0.13%      (610)   -0.10%
                                     ---------  -------  ---------  -------
         Total. . . . . . . . . . .  $692,866   100.00%  $601,235   100.00%
                                     =========  =======  =========  =======
</TABLE>

At  September  30,  2006,  the loan portfolio is comprised of 84.35% real estate
loans.  Commercial,  financial  and  agricultural  loans  comprise  11.18%,  and
consumer  loans  comprise  4.58%  of  the  portfolio.

Commercial  real  estate comprises 27.85% of the loan portfolio and is primarily
owner  occupied properties where the operations of the commercial entity provide
the  necessary  cash  flow to service the debt.  For this portion of real estate
loan portfolio, repayment is not dependent upon the sale of the real estate held
as  collateral.  Construction  and development (34.82%) has been an increasingly
important  portion  of  the  real  estate loan portfolio.  The Company carefully
monitors  the  loans  in  this  category  since  the repayment of these loans is
generally  dependent  upon  the  sale of the real estate in the normal course of
business  and  can  be  impacted by national and local economic conditions.  The
residential  category,  19.47% of the portfolio, represents those loans that the
Company  chooses  to  maintain  in  its  portfolio  rather than selling into the
secondary  market  for  marketing  and  competitive reasons and commercial loans
secured  by  residential  real  estate.  The residential held for sale category,
2.21%  of  the  portfolio, comprises loans that are in the process of being sold
into  the secondary market.  In these loans, the credit has been approved by the
investor  and  the interest rate locked so that the Company minimizes credit and
interest  rate  risk  with  respect  to  these  loans.


                                       24
<PAGE>
The Company has no large loan concentrations to individual borrowers.  Unsecured
loans at September 30, 2006 were $10.8 million.  While management uses available
information  to recognize losses on loans, future additions to the allowance may
be  necessary  based  on  changes  in economic conditions.  In addition, various
regulatory  agencies,  as  an  integral  part  of  their  examination  process,
periodically  review the Company's allowance for loan losses.  Such agencies may
advise  additions  to  the  allowance based on their judgments about information
available to them at the time of their examination.  Such regulatory guidance is
considered,  and  the  Company  may  recognize  additions  to the allowance as a
result.

Additions to the allowance for loan losses are made periodically to maintain the
allowance  at an appropriate level based upon management's analysis of potential
risk in the loan portfolio.  Loans determined to be uncollectible are charged to
the  allowance  for  loan  losses  and  subsequent  recoveries  are added to the
allowance.  A  provision  for  losses  in  the amount of $667,000 was charged to
expense  for  the  quarter ended September 30, 2006 compared to $589,000 for the
quarter  ended  September  30,  2005, and $1.6 million for the nine months ended
September  30,  2006 and September 30, 2005.  The increase in provision for loan
losses  for  the  three-month  period  is  primarily  due the $101,000 provision
related  to the new SB&T loan portfolio.  The increase in the allowance for loan
losses  as  of September 30, 2006 as compared to September 30, 2005 is primarily
due  to  increases  in outstanding loan balances somewhat offset by decreases to
the  allowance  due  to  lower levels of Classified and Watch-rated debt and the
change in the allowance calculation related to economic and market risk factors.
Charge-offs  for the nine months ended September 30, 2006 increased primarily as
the  result  of  a  $423,000  charge-off  for  one  real  estate  loan.

<TABLE>
<CAPTION>
                            Table 9 - Allowance for Loan Losses

                                          2006      2005
                                        --------  --------
<S>                                     <C>       <C>
          Beginning balance, January 1  $ 9,125   $ 7,930
          Provision charged to expense    1,627     1,576
          Recoveries                        626       714
          Loans charged off              (1,640)   (1,126)
                                        --------  --------
          Ending balance, September 30  $ 9,738   $ 9,094
                                        ========  ========
</TABLE>

At  September 30, 2006 the ratio of allowance for loan losses to total loans was
1.41%  compared  to  1.52% at December 31, 2005 and 1.62% at September 30, 2005.
Management  considers  the  current  allowance for loan losses appropriate based
upon  its analysis of the potential risk in the portfolio, although there can be
no  assurance  that the assumptions underlying such analysis will continue to be
correct.

Liquidity  and  Capital  Resources
----------------------------------

The  Company's  liquidity  remains  adequate  to meet operating and loan funding
requirements.  The  loan  to  deposit  ratio  at  September  30,  2006 was 87.4%
compared  to  90.6%  at  December 31, 2005 and 87.0% at September 30, 2005.  The
decrease  in  the  loan


                                       25
<PAGE>
to  deposit  ratio from December 31, 2005 to September 30, 2006 is primarily due
to  a $21.5 million short-term deposit made on the last day of the quarter.  The
increase  in  the  loan to deposit ratio from September 30, 2005 to December 31,
2005  reflects loan growth at a higher rate than deposit growth during that time
period.  Deposits  at  September  30,  2006  and December 31, 2005 include $61.4
million  and  $40.4  million  of brokered certificates of deposit, respectively.
GB&T  has  also  utilized  borrowings  from  the  Federal  Home Loan Bank.  GB&T
maintains  a line of credit with the Federal Home Loan Bank approximating 10% of
GB&T's  total  assets.  Federal  Home  Loan  Bank advances are collateralized by
eligible  first  mortgage  loans,  commercial  real  estate loans and investment
securities.  These borrowings totaled $60.0 million at September 30, 2006.  GB&T
maintains  repurchase  lines of credit with SunTrust Robinson Humphrey, Atlanta,
Georgia,  for  advances  up to $20.0 million and with The Bankers Bank, Atlanta,
Georgia,  for  advances up to $10.0 million of which no amounts were outstanding
in  either  case  at  September  30,  2006.  GB&T  has a federal funds purchased
accommodation  with The Bankers Bank, Atlanta, Georgia, for advances up to $16.7
million  and  with  SunTrust  Bank,  Atlanta,  Georgia  for advances up to $10.0
million, while SB&T has a federal funds purchased accommodation with The Bankers
Bank,  Atlanta,  Georgia,  for  advances  up  to  $3.3  million.  Additionally,
liquidity  needs  can  be  satisfied  by  the  structuring  of the maturities of
investment  securities  and  the  pricing  and  maturities on loans and deposits
offered  to  customers.  The  Company  also  uses  retail  securities sold under
repurchase  agreements  to fund growth.  Retail securities sold under repurchase
agreements  were  $62.9  million  at  September  30,  2006.

Stockholders' equity to total assets was 7.40% at September 30, 2006 compared to
7.36%  at  December  31,  2005  and  7.66% at September 30, 2005.  Stockholders'
equity as of September 30, 2006 includes proceeds of $4.5 million from a private
placement  stock offering held during the third quarter of 2006.  The capital of
the  Company  exceeded all required regulatory guidelines at September 30, 2006.
The  Company's  Tier  1 risk-based, total risk-based and leverage capital ratios
were  12.23%,  13.48%,  and  10.05%,  respectively,  at September 30, 2006.  The
following  table  reflects the current regulatory capital levels in more detail,
including  comparisons  to  the  regulatory  minimums.


                                       26
<PAGE>
<TABLE>
<CAPTION>
                                  Table 10 - Regulatory Capital Requirements
                                              September 30, 2006
                                            (Dollars in Thousands)

                                                            Required for capital
                                       Actual                 adequacy purposes               Excess
                                 Amount       Percent        Amount      Percent        Amount      Percent
                              --------------------------  ------------------------  -------------------------
<S>                           <C>           <C>           <C>          <C>           <C>          <C>
Southeastern Bank Financial
Corporation

Risk-based capital:
  Tier 1 capital              $     96,845        12.23%       31,687         4.00%       65,158         8.23%
  Total capital                    106,781        13.48%       63,374         8.00%       43,407         5.48%
Tier 1 leverage ratio               96,845        10.05%       38,552         4.00%       58,293         6.05%

Georgia Bank & Trust Company

Risk-based capital:
  Tier 1 capital              $     70,573         9.08%       31,095         4.00%       39,478         5.08%
  Total capital                     80,210        10.32%       62,191         8.00%       18,019         2.32%
Tier 1 leverage ratio               70,573         7.49%       37,671         4.00%       32,902         3.49%
</TABLE>

Management  is  not  aware  of  any  events or uncertainties that are reasonably
likely  to  have a material effect on the Company's liquidity, capital resources
or  operations.

Commitments  and  Contractual  Obligations
------------------------------------------

The  Company  is  a  party to lines of credit with off-balance sheet risk in the
normal  course  of business to meet the financing needs of its customers.  Lines
of credit are unfunded commitments to extend credit.  These instruments involve,
in  varying  degrees, exposure to credit and interest rate risk in excess of the
amounts  recognized  in  the  financial  statements.  The  Company's exposure to
credit  loss  in the event of nonperformance by the other party to the financial
instrument  for  unfunded  commitments to extend credit and letters of credit is
represented  by  the  contractual  amount  of  those  instruments.  The  Company
evaluates  construction and acquisition and development loans for the percentage
completed  before  extending  additional  credit.  The  Company follows the same
credit policies in making commitments and contractual obligations as it does for
on-balance  sheet  instruments.

Unfunded commitments to extend credit where contract amounts represent potential
credit risk totaled $181.3 million at September 30, 2006.  These commitments are
primarily  at  variable  interest  rates.


                                       27
<PAGE>
The  Company's  commitments  are  funded  through  internal  funding  sources of
scheduled  repayments of loans and sales and maturities of investment securities
available  for  sale  or external funding sources through acceptance of deposits
from  customers  or  borrowings  from  other  financial  institutions.

The  following table is a summary of the Company's commitments to extend credit,
commitments  under  contractual  leases  as  well  as  the  Company' contractual
obligations,  consisting  of deposits, FHLB advances, which are subject to early
termination  options,  and  borrowed  funds  by  contractual  maturity  date.

<TABLE>
<CAPTION>
Table 11 -
Commitments and
Contractual Obligations       Less than 1                               More than
($ in thousands)                  Year      1 - 3 Years   3 - 5 Years    5 Years
----------------------------  ------------  ------------  ------------  ----------
<S>                           <C>           <C>           <C>           <C>
Lines of credit               $    181,325             -             -           -
Lease agreements                       114            89            70         175
Deposits                           718,484        65,325         4,305       4,484
Securities sold under
  repurchase agreements             62,903             -             -           -
FHLB advances                        5,000             -        30,000      25,000
Other borrowings                     1,000             -             -           -
                              ------------  ------------  ------------  ----------
  Total commitments and
    contractual obligations   $    968,826  $     65,414  $     34,375  $   29,659
                              ============  ============  ============  ==========
</TABLE>

Although management regularly monitors the balance of outstanding commitments to
fund  loans  to  ensure  funding  availability should the need arise, management
believes  that  the  risk  of  all customers fully drawing on all these lines of
credit  at  the  same  time  is  remote.

Effects of Inflation and Changing Prices
----------------------------------------

Inflation  generally  increases the cost of funds and operating overhead, and to
the  extent  loans  and  other  assets  bear  variable rates, the yields on such
assets.  Unlike  most  industrial  companies,  virtually  all  of the assets and
liabilities  of  a  financial  institution are monetary in nature.  As a result,
interest  rates generally have a more significant impact on the performance of a
financial institution than the effects of general levels of inflation.  Although
interest  rates  do  not  necessarily move in the same direction and to the same
extent  as  the  prices  of goods and services, increases in inflation generally
have  resulted in increased interest rates.  In addition, inflation can increase
a  financial  institution's  cost  of  goods and services purchased, the cost of
salaries  and  benefits,  occupancy  expense  and  similar items.  Inflation and
related  increases  in  interest  rates  generally  decrease the market value of
investments  and  loans  held  and may adversely affect liquidity, earnings, and
stockholders'  equity.  Mortgage  originations  and refinancings tend to slow as
interest  rates  increase,  and  can  reduce  the  Company's  earnings from such
activities  and  the  income  from the sale of residential mortgage loans in the
secondary  market.


                                       28
<PAGE>
Item  3.  Quantitative  and  Qualitative  Disclosures  About  Market  Risk

As of September 30, 2006, there were no substantial changes in the interest rate
sensitivity  analysis or the sensitivity of market value of portfolio equity for
various  changes  in  interest  rates  calculated  as of December 31, 2005.  The
foregoing  disclosures  related to the market risk of the Company should be read
in  conjunction  with  the  Company's audited consolidated financial statements,
related  notes  and  management's discussion and analysis of financial condition
and  results  of operations for the year ended December 31, 2005 included in the
Company's  2005  Annual  Report  on  Form  10-K.

Item  4.  Controls  and  Procedures

As  of  the end of the period covered by this report, the Company carried out an
evaluation,  under  the  supervision and with the participation of the Company's
management,  including  the  Company's  President  and  Chief  Executive Officer
(principal  executive  officer) and its Group Vice President and Chief Financial
Officer  (principal  financial  officer), of the effectiveness of the design and
operation  of  the  Company's  disclosure  controls  and  procedures pursuant to
Exchange  Act  Rule 13a-15.  Based upon that evaluation, such officers concluded
that  the  Company's  disclosure controls and procedures are effective in timely
alerting  them  to  material  information relating to the Company (including its
consolidated  subsidiaries)  that  is  required  to be included in the Company's
periodic  filings  with the Securities and Exchange Commission.  There have been
no changes in the Company's internal controls or, to the Company's knowledge, in
other  factors  during  the  quarter covered by this report that have materially
affected,  or are reasonably likely to materially affect, the Company's internal
controls  over  financial  reporting.


                                       29
<PAGE>
                                    Part II
                               OTHER INFORMATION


Item  1.       Legal  Proceedings

               There  are  no  material  pending  legal proceedings to which the
               Company  or any of its subsidiaries is a party or of which any of
               their  property  is  subject.

Item  1A.      Risk  Factors

               In  addition  to  the  other  information  set  forth  in  this
               report,  you  should  carefully consider the factors discussed in
               Part I, "Item 1A. Risk Factors" in the Company's Annual Report on
               Form  10-K  for  the  year  ended  December 31, 2005, which could
               materially  affect  its  business,  financial condition or future
               results.  The  risks  described in the Annual Report on Form 10-K
               are  not  the only risks facing the Company. Additional risks and
               uncertainties  not  currently  known  to  management  or  that
               management  currently  deems to be immaterial also may materially
               adversely  affect  the  Company's  business,  financial condition
               and/or  operating  results.

Item  2.       Unregistered  Sales  of  Equity Securities and Use of Proceeds

               During  the  third  quarter  of  2006,  the  Company  issued  and
               sold 136,839 shares of common stock at a purchase price of $33.25
               per  share (representing aggregate proceeds of approximately $4.5
               million)  in  a  private placement pursuant to Rule 506 under the
               Securities  Act  of 1933, as amended. Pursuant to an extension of
               the  offering period from September 30, 2006 to October 16, 2006,
               the Company sold an additional 13,536 shares at the same purchase
               price  per  share  on  October  3,  2006. As a result, the entire
               150,375 shares offered were sold, representing aggregate proceeds
               to  the  company  of  approximately  $5.0  million.

               No  underwriting  or  placement  agency  fees  were  incurred  in
               connection  with the offering. The offering was conducted without
               general  solicitation  and  directed only to accredited investors
               and  under  35  financially  sophisticated,  but  unaccredited,
               investors and otherwise in accordance with the provisions of Rule
               506.

               Issuer Purchases of Equity Securities

               The  following  table  sets  forth  information  regarding  the
               Company's purchases of its common stock on a monthly basis during
               the  third  quarter  of  2006.


                                       30
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                                                           Maximum Number (or
                                                      Total Number of      Appropriate Dollar
                                                     Shares (or Units)    Value) of Shares (or
                     Total Number  Average Price   Purchased as Part of      Units) Yet Be
                      of Shares       Paid Per      Publicly Announced    Purchased Under the
Period                Purchased        Share         Plans or Programs     Plans or Programs
-------------------  ------------  --------------  ---------------------  --------------------
<S>                  <C>           <C>             <C>                    <C>
July 1 through
July 31, 2006                   -               -                  3,032                96,968
-------------------  ------------  --------------  ---------------------  --------------------
August 1 through
August 31, 2006               336  $        41.75                  3,368                96,632
-------------------  ------------  --------------  ---------------------  --------------------
September 1 through
September 30, 2006              -               -                  3,368                96,632
-------------------  ------------  --------------  ---------------------  --------------------
Total                         336  $        41.75                  3,368                96,632
----------------------------------------------------------------------------------------------
</TABLE>

               On  April  15,  2004,  the  Company announced the commencement of
               a  stock repurchase program, pursuant to which it will, from time
               to  time,  repurchase  up  to  100,000  shares of its outstanding
               stock.  The  program  does  not have a stated expiration date. No
               stock  repurchase  programs  were  terminated  during  the  third
               quarter  of  2006.

Item  3.       Defaults  Upon  Senior  Securities

               Not  applicable

Item  4.       Submission  of  Matters  to  a  Vote  of  Security  Holders

               None

Item 5.        Other Information

               None

Item 6.        Exhibits

               31.1 Certification  of  Chief  Executive  Officer  Pursuant  to
                    Section  302  of  the  Sarbanes-Oxley  Act  of  2002.

               31.2 Certification  of  Chief  Financial  Officer  Pursuant  to
                    Section  302  of  the  Sarbanes-Oxley  Act  of  2002.

               32.1 Certification  of  Chief  Executive  Officer  and  Chief
                    Financial  Officer  Pursuant  to  Section  906  of  the
                    Sarbanes-Oxley  Act  of  2002.


                                       31
<PAGE>
                     SOUTHEASTERN BANK FINANCIAL CORPORATION
                              Form 10-Q Signatures


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                    SOUTHEASTERN BANK FINANCIAL CORPORATION


Date: November 8, 2006                  By:  /s/ Darrell R. Rains
     ------------------                    -------------------------------------
                                        Darrell R. Rains
                                        Group Vice President, Chief
                                        Financial Officer (Duly Authorized
                                        Officer of Registrant and Principal
                                        Financial Officer)


                                       32